VictoriaHowley

LONDON (MarketWatch) -- Any credit facility that Citigroup Inc.
C, -0.62%
extends to embattled U.K. mortgage bank Northern Rock (NRK.LN) would likely involve negotiations with the Financial Services Authority, the Bank of England and the Treasury Committee, a person familiar with the matter said Tuesday.

According to press reports, Citigroup is considering a GBP10 billion funding line for Northern Rock. It is unclear what form the financing will take, or when the deal will be agreed.

Northern Rock said earlier in a statement that new guarantee arrangements had been agreed with HM Treasury. The Treasury has confirmed that the guarantee arrangements previously announced to protect existing depositors will be extended to cover all new retail deposits made after Sept. 19, the company said.

Northern Rock has received a number of approaches regarding a variety of potential transactions. Citigroup and Merrill Lynch & Co. Inc.
MER, +1.71%
are advising the company about its options. The Wall Street Journal said that Apollo Management LP and Blackstone Group LP
BX, +0.79%
late last week individually expressed an interest in the bank, according to people close to the matter. Spokesmen for both firms declined to comment.

The inquiries follow those of J.C. Flowers & Co. and Cerberus Capital Management LP, which have held detailed discussions with Northern Rock and its advisers.

Northern Rock ran into problems due to its high reliance on wholesale markets to fund its business model. Its customer loans were more than three times its deposit base at the end of June, leaving 77% of its funding to come from the wholesale markets.

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